Exercise 8.7 ★ ★ ★ ACCOUNTING FOR CASH-SETTLED SHARE-BASED PAYMENT TRANSACTIONS Abernethy Ltd grants 1000 share appreciation rights (SARs) to 10 senior managers, to be taken in cash within 2 years of vesting date on condition that the managers do not leave in the next 3 years. The SARs vest at the end of year 3. Abernethy Ltd estimates the fair value of the SARs at the end of each year in which a liability exists as shown below. The intrinsic value of the SARs at the date of exercise at the end of year 3 is also shown. Year Fair value Intrinsic value Number of managers who exercised their SARs 1 $ 4.40 2 $ 5.50 3 $10.20 $9.00 4 During year 1, one employee leaves and Abernethy Ltd estimates that a further two will leave before the end of year 3. One employee leaves during year 2 and the corporation estimates that another employee will depart during year 3. One employee leaves during year 3. At the end of year 3, four employees exercise their SARs. Required Prepare a schedule setting out the expense and liability that Abernethy Ltd must recognise at the end of each of the fi rst 3 years.